What Is a Trade Line?

A trade line is a record of activity for any type of credit extended to a borrower and reported to a credit reporting agency. A trade line is established on a borrower’s credit report when a borrower is approved for credit. The trade line records all of the activity associated with an account.

Comprehensively, trade lines are used by credit reporting agencies to calculate a borrower’s credit score. Different credit reporting agencies give differing weights to the activities of trade lines when establishing a credit score for borrowers.

How a Trade Line Works

A trade line is an important record-keeping mechanism that tracks the activity of borrowers on their credit reports. Each credit account has its own trade line. Borrowers will have multiple trade lines on their credit report, each representing the individual borrowing accounts for which they have been approved. The basic types of accounts that have a trade line are those paid off in fixed installments, and these accounts are often broken into categories. First, revolving trade lines are reported on credit cards or other lines of credit. Second, installment trade lines report the history of car loans, mortgages, student loans, and personal loans. Open accounts, a third type of account on a trade line, are often associated with businesses as opposed to individuals.

Records Included in a Trade Line

Trade lines may contain a variety of different data points related to the creditor, the lender, and the type of credit that is being provided. The trade line often contains the name of the creditor or lender, the account or another identifier for the type of credit being provided, the parties responsible for paying the loan, and the payment status of the account. The trade line will also contain particular account milestones, such as the date the credit was extended, the credit limit, the payment history, all levels of delinquency if any missed payments have occurred, and the total amount owed as of the last report. If a consumer closes an account, that account will typically remain on his or her credit report as a trade line for seven years, though in some cases the account can go away sooner. Payment status indicates whether or not payments for the loan are being made on time and how late they are if they are not being made on time. If the payments are being made on time, the payment status will indicate that the payments are being made according to the terms of the credit agreement.

Special Considerations

Late payments are usually grouped in a range of days according to how late they are. For example, delinquencies may be reported as 30 days late, 60 days late, or 90 days late. The payment status may be set to “charge off” if the creditor deems it unlikely that the debt will be repaid, and the status may also indicate that the credit recipient has entered bankruptcy. As trade lines are used by credit reporting agencies to develop an individual’s credit score, credit scores vary, with higher scores generally given to individuals with more-favorable trade line reporting. Factors considered when calculating the credit score include the number of trade lines, types of trade lines, lengths of open accounts, and payment history. In addition to reviewing a borrower’s credit score, a lender who pulls data from a credit-reporting agency may also comprehensively analyze all of the trade line reporting on a credit report when considering a credit application in the underwriting process.

FICO Credit Score

When applying for credit, your lender will often request your credit score as part of the approval process. Your FICO score is directly determined from the information listed on each trade line. Below is how your FICO score is calculated and how each section relates to trade lines.

• Payment History (35%): Trade lines include debt or lines of credit that have been closed for up to 10 years.
• Amounts Owed (30%): Trade lines are created for every line of credit. Each line of credit, revolving line, or installment agreement has its own trade line.
• Length of Credit History (15%): Trade lines include every payment you've ever made against every account or line. This also includes every installment payment you've missed.
• New Credit (10%): Trade lines are generally created within a month of the first payment being made on the associated line or account.
• Credit Mix (10%): Trade lines are created for a variety of types of accounts including mortgages, car loans, credit cards, student loans, and personal loans.